Mixed Signals for Q1 Greentech Investment

What to make of the mixed messages in the green technology investment figures from the first quarter of 2011? Depending on your point of view, the first three months either signal a record-setting expansion for the industry or retrenchment in the face of economic and political headwinds.

My first-quarter 2011 report at GigaOM Pro (subscription required) lays out highlights and breaks out in-depth details by industry sector. But at the highest level, the nature of the first quarter’s data is reflected in a big rise in venture capital investment, and a big drop-off in global clean energy financing.

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First, the bad news. Bloomberg New Energy Finance reported last week that global renewable energy investment fell off sharply in the first quarter, falling to $31.1 billion, more than a third down from the fourth quarter’s $47.1 billion. The biggest category of asset finance fell to $25.7 billion from the previous quarter’s $36.6 billion.

While part of that is due to the “hangover” from the record-high, fourth-quarter investments, it was mainly driven by skidding solar markets in Europe and headwinds for the U.S. wind power industry, now facing decade-lows in prices for the natural gas that spins the turbines it competes against.

Against this backdrop, however, shone some strong numbers for green technology venture capital investments, which grew to $2.57 billion in the first quarter, according to the Cleantech Group. That’s the second-highest quarter on record, and up 52 percent from the fourth quarter’s $1.69 billion. (Bloomberg New Energy Finance put its more restrictive tally of renewable energy venture capital at $1.8 billion in the first quarter, up just a hair from $1.7 billion in the fourth quarter.)

Cleantech Group’s big numbers came with some catches, however. First, the 159 deals reported was the lowest quarterly number by deal number since mid-2009, and about 64 percent of those deals were follow-on rounds. In dollar terms, those follow-on rounds made up $2.39 billion— 93 percent of the total amount raised. That indicates a field in which well-funded startups are dominating the available VC investment.

Indeed, a good portion of the quarter’s haul consisted of $100-million-plus, late follow-on rounds for BrightSource Energy, Miasole, Fisker Automotive and Bloom Energy. These companies have raised massive amounts of VC cash already, and that they returned to investors, rather than seeking financing from the public markets, could be taken as either a sign of a weak economy or potential weakness in their own financials. Add in the $75 million in secured debt raised by Solyndra in the first quarter, and you’ve got a host of high-profile greentech startups that will have a lot to prove in 2011.

Greentech IPOs had a relatively low showing in the first quarter, with nine public offerings yielding a combined total of $2.1 billion — much lower than the $8.24 billion from 30 IPOs in the fourth quarter of 2010. At the same time, however, green mergers and acquisitions were on the rise, with $15.3 billion in disclosed transactions, nearly double the $8.76 billion in disclosed transactions in the fourth quarter of 2010, Cleantech Group reported. Smart grid was a particularly active sector, with General Electric (s GE), Schneider Electric, IBM (s IBM), Johnson Controls (s JCI) and Alstom all making significant purchases aimed at expanding the range of products and services they offer.

With the U.S. locked in a partisan struggle over whether or not much of the country’s greentech support should be done away with altogether; Europe facing continuing financial crises; and Japan reeling from the earthquake, tsunami and still-unfolding nuclear power plant disaster, it looks as if China will remain the key government backer of green technology.